Fundamental Developments

The price of gold dropped two bucks, and silver two cents. However, it was a pretty wild ride around the time when some information came out from our monetary masters at their annual boondoggle at Jackson Hole. We will show some charts of Friday’s intraday action, below.

 

The overseers of the developed world’s major currency printing presses at Jackson Hole. It almost looks as if they have been literally put out to pasture, alas, that is not the case. [PT]

Photo credit: Reuters

 

As always, the question is which moves are driven by fundamentals, and which by speculation? We will show graphs of the basis, the true measure of the fundamentals.

But first, here are the charts of the prices of gold and silver, and the gold-silver ratio.

 

Prices of gold and silver – click to enlarge.

 

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. The ratio barely budged.

 

In this graph, we show both bid and offer prices for the gold-silver ratio. If you were to sell gold on the bid and buy silver at the ask, that is the lower bid price. Conversely, if you sold silver on the bid and bought gold at the offer, that is the higher offer price.

 

Gold-silver ratio, bid and ask – click to enlarge.

 

For each metal, we will look at a graph of the basis and co-basis overlaid with the price of the dollar in terms of the respective metal. It will make it easier to provide brief commentary. The dollar will be represented in green, the basis in blue and co-basis in red.

 

Here is the gold graph.

 

Gold basis, co-basis and the US dollar priced in milligrams of gold – click to enlarge.

 

The price didn’t move much, and neither did the basis.

So our calculated gold fundamental price was up $5, to $1,330.

More interestingly, let’s look at the basis action when the price was gyrating on Friday.

 

Gold price and gold basis intraday on Friday last week – click to enlarge.

 

The correlation between basis and price is uncanny, isn’t it? And it works in both directions. Manipulators speculators were buying paper gold from around 13:15 GMT (which is 14:15 BST or 9:15 NY time). Then these same manipulators speculators — or was it a different group, who overpowered the first, hm? — started selling at around 13:40. Then buying resumed at 14:00.

We are joking about the manipulation, of course. In our view, superstition thrives where people struggle to explain what they see without a scientific theory. Once upon a time, they saw thunder and lightning and thought the gods were having battle, or perhaps expressing anger at some sin of man. Such mythology could not survive the advent of the field of meteorology (if even that long).

The manipulation myth similarly doesn’t belong in a world where there is an arbitrage theory of markets, and daily pictures of the basis and co-basis.

Note also the rise in price at 15:00, without a rise in basis. That likely reflects some buying of physical metal.

Now let’s look at silver.

 

Silver basis and co-basis and the dollar priced in grams of silver – click to enlarge.

 

The basis fell and the co-basis rose. Not a lot, but it did lift our calculated silver fundamental price $0.20 to $17.18.

Here is the intraday price and basis graph for silver during Friday’s roller-coaster.

 

Silver price and silver basis intraday on Friday – click to enlarge.

 

As with gold, the basis tracks the price. The moves in both directions were driven by speculative trading.

 

© 2017 Monetary Metals

 

Dr. Keith Weiner is the president of the Gold Standard Institute USA, and CEO of Monetary Metals. Keith is a leading authority in the areas of gold, money, and credit and has made important contributions to the development of trading techniques founded upon the analysis of bid-ask spreads. Keith is a sought after speaker and regularly writes on economics. He is an Objectivist, and has his PhD from the New Austrian School of Economics. He lives with his wife near Phoenix, Arizona.

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Too Much Bubble-Love, Likely to Bring Regret
      Unprecedented Extremes in Overbought Readings Readers may recall our recent articles on the blow-off move in the stock market, entitled Punch-Drunk Investors and Extinct Bears (see Part 1 & Part 2 for the details). Bears remained firmly extinct as of last week – in fact, some of the sentiment indicators we are keeping tabs on have become even more stretched, as incredible as that may sound. For instance, assets in bullish Rydex funds exceeded bear assets by a factor of more than 37...
  • How to Buy Low When Everyone Else is Buying High
      When to Sell? The common thread running through the collective minds of present U.S. stock market investors goes something like this: A great crash is coming.  But first there will be an epic run-up climaxing with a massive parabolic blow off top.  Hence, to capitalize on the final blow off, investors must let their stock market holdings ride until the precise moment the market peaks – and not a moment more.  That’s when investors should sell their stocks and go to...
  • What Kind of Stock Market Purge Is This?
      Actions and Reactions Down markets, like up markets, are both dazzling and delightful. The shock and awe of near back-to-back 1,000 point Dow Jones Industrial Average (DJIA) free-falls is indeed spectacular. There are many reasons to revel in it.  Today we shall share a few. To begin, losing money in a multi-day stock market dump is no fun at all.  We'd rather get our teeth drilled by a dentist.  Still, a rapid selloff has many positive qualities.   Memorable moments from...
  • Monetary Metals Brief 2018
      Short and Long Term Forecasts Predicting the likely path of the prices of the metals in the near term is easy. Just look at the fundamentals. We have invested many man-years in developing the theory, model, and software to calculate it. Every week we publish charts and our calculated fundamental prices.   A selection of 1 and ½ ounce gold bars – definitely more fondle-friendly than bitcoin, but a bit more cumbersome to send around. [PT]   However, predicting the...
  • The Donald Saves the Dollar
      Something for Nothing The world is full of bad ideas.  Just look around.  One can hardly blink without a multitude of bad ideas coming into view.  What’s more, the worse an idea is, the more popular it becomes. Take Mickey’s Fine Malt Liquor.  It’s nearly as destructive as prescription pain killers.  Yet people chug it down with reckless abandon.   Looking at the expression of this Mickey's Malt Liquor tester one might initially get the impression that he is...
  • US Stocks - Minor Dip With Potential, Much Consternation
      It's Just a Flesh Wound – But a Sad Day for Vol Sellers On January 31 we wrote about the unprecedented levels - for a stock market index that is - the weekly and monthly RSI of the DJIA had reached (see: “Too Much Bubble Love, Likely to Bring Regret” for the astonishing details – provided you still have some capacity for stock market-related astonishment). We will take the opportunity to toot our horn by reminding readers that we highlighted VIX calls of all things as a worthwhile...
  • Why I Own Gold and Gold Mining Companies – An Interview With Jayant Bandari
      Opportunities in the Junior Mining Sector Maurice Jackson of Proven and Probable has recently interviewed Jayant Bandari, the publisher of Capitalism and Morality and a frequent contributor to this site. The topics discussed include currencies, bitcoin, gold and above all junior gold stocks (i.e., small producers and explorers). Jayant shares some of his best ideas in the segment, including arbitrage opportunities currently offered by pending takeovers – which is an area that generally...
  • “Strong Dollar”, “Weak Dollar” - What About a Gold-Backed Dollar?
      Contradictory Palaver The recent hullabaloo among President Trump’s top monetary officials about the Administration’s “dollar policy” is just the start of what will likely be the first of many contradictory pronouncements and reversals which will take place in the coming months and years as the world’s reserve currency continues to be compromised.  So far, the Greenback has had its worst start since 1987, the year of a major stock market reset.   A modern-day...
  • The FOMC Meeting Strategy: Why It May Be Particularly Promising Right Now
      FOMC Strategy Revisited As readers know, investment and trading decisions can be optimized with the help of statistics. One way of doing so is offered by the FOMC meeting strategy.   The rate hikes are actually leading somewhere – after the Wile E. Coyote moment, the FOMC meeting strategy is especially useful [PT]   A study published by the Federal Reserve Bank of New York in 2011 examined the effect of FOMC meetings on stock prices.  The study concluded that these...
  • Seasonality of Individual Stocks – an Update
      Well Known Seasonal Trends Readers are very likely aware of the “Halloween effect” or the Santa Claus rally. The former term refers to the fact that stocks on average tend to perform significantly worse in the summer months than in the winter months, the latter term describes the typically very strong advance in stocks just before the turn of the year. Both phenomena apply to the broad stock market, this is to say, to benchmark indexes such as the S&P 500 or the...
  • The Future of Copper – Incrementum Advisory Board Meeting Q1 2018
      Copper vs. Oil The Q1 2018 meeting of the Incrementum Fund's Advisory Board took place on January 24, about one week before the recent market turmoil began. In a way it is funny that this group of contrarians who are well known for their skeptical stance on the risk asset bubble, didn't really discuss the stock market much on this occasion. Of course there was little to add to what was already talked about extensively at previous meetings. Moreover, the main focus was on the topic...
  • When Budget Deficits Will Really Go Vertical
      Mnuchin Gets It United States Secretary of Treasury Steven Mnuchin has a sweet gig.  He writes rubber checks to pay the nation’s bills.  Yet, somehow, the rubber checks don’t bounce.  Instead, like magic, they clear. How this all works, considering the nation’s technically insolvent, we don’t quite understand.  But Mnuchin gets it.  He knows exactly how full faith and credit works – and he knows plenty more.   Master of the Mint and economy wizard Steven Mnuchin and...

Support Acting Man

Item Guides

Top10BestPro
j9TJzzN

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com